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Why Sellers May Miss Out on PayPal Lawsuit Settlement

PayPal agreed to settle a class action lawsuit involving its practice of account holds, but many sellers may miss out on receiving their share of the $4 million settlement fund, for several reasons.

PayPal users receive an enormous amount of spoof emails on a regular basis from fraudsters posing as the payments company. As a result, users are skeptical about the email that PayPal sent out this month telling them they need to file a claim if they wish to participate.

People are discussing the email on niche industry boards, from Rolex watches to guns. Many people believe the email is a spoof and some even are mocking those who ask if it’s legitimate, so sure are they that the email is bogus.

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Compounding the problem: sellers have to enter their name, address, phone number, and the email address associated with their PayPal account on an unknown website – without knowing for sure who is behind it. The website is registered privately – that means you can’t use the WhoIs database to verify that the URL was set up by the settlement administrator.

Also unknown is whether the administrator set up the site securely to protect the information that users must provide in order to submit a claim. A recent case involving an Amazon account takeover shows just how valuable a person’s name, address, and email address are – that information can be used by scammers to commit fraud using social engineering techniques, for example.

Another impediment to ensuring sellers get their fair share of the settlement: the very fact that PayPal accountholders have to take action. In other ecommerce-related class action lawsuit settlements, sellers have received funds without having to take any action.

In addition, sellers may believe they must know the details of the account holds that had been placed on their accounts in order to file a claim – while that’s not the case, they do have to be certain that such a hold or reserve had been placed on their accounts during the relevant time period.

Comment on the EcommerceBytes Blog.

Update 2/1/16: We reached out to PayPal and to Epiq Systems, the court-appointed administrator of the claims process. PayPal has yet to respond.

Here is Epiq Systems’s response when we asked about the security measures in place to safeguard the data being collected; who has access to it; and what will happen to the database after the settlement.

“By way of background, Epiq is a leading provider of legal technology solutions and services for law firms, corporations, and trustees worldwide. We are publicly traded company listed on the NASDAQ (EPIQ) and our main business lines are electronic discovery, bankruptcy, and settlement administration.

“I recommend having a look at our website for information regarding our data security practices and our claims administration services.”

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Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. Send news tips to ina@ecommercebytes.com.


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